Where the money goes: a story told in pictures

I’ve got an article in this week’s magazine about how to spend less money. Unfortunately, the graphic that went along with it didn’t make it online. The art department folks—designer Patricia Hwang and photo editor Bill Carwin—did a great job, so now, exclusively for readers of the Curious Capitalist, here it is:

If you click on the picture, it should open up larger in a new window.

The data we used can, for the most part, be found here. Though some of the more granular numbers came from a longer document that the BLS folks had to send me by e-mail. There’s also a tricky omission. For homeowners, interest paid on a mortgage is counted as an expense, but payments on principal aren’t. Principal payments are in a different set of household accounts—the feeling is that’s more about investing than it is spending. The $16,920 that the average family spends on housing really only represents money which you’re not going to get back when you move.

As I pointed out in the accompanying story, 12% of the average household’s spending goes toward food, 18% for transportation and 34% for housing (again, excluding mortgage principal payments). My deep conclusion is that if you want to spend less, you probably need to do more than cut back on Starbucks. Other insights can be found here.

Barbara!

Stocks Rally Further in Run-up to EU Summit

MOSCOW — Global stocks enjoyed one of their best days in weeks on Tuesday ahead of a summit of European leaders that’s expected to be dominated by calls to boost economic growth.

Europe remains the focus of attention across all financial markets in the run-up to the June 17 Greek election that could go a long way to determining the country’s membership of the euro as well as the future of the single currency zone.

mbirchmeier

For homeowners, interest paid on a mortgage is counted as an expense, but payments on principal aren’t. Principal payments are in a different set of household accounts—the feeling is that’s more about investing than it is spending.
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So if house principle is not counted, how about other long term financial affects, student loan interest, credit card etc. Should this also count appreciation and depreciation of house/assets?
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Incidentally a quick google search says that the median household income for 2007 was ~$50k ($50,230 was the number I saw) Does this mean the average household saved $500 a year or are we vastly overspending since I see no bucket/picture for taxes?
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-MBirchmeier
plukasiak

Pi and Koa

have told me I have to stop reading you Barbara, if you think that my doggies are “entertainment” expenses! Put them under “health care” (nothing is better for my mental health than the unconditional love of my dogs!) or housing (two dogs are the best security system you can have!)
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I’ve had to explain to them that the picture of a dog under entertainment represents my cable bill, which includes access to Animal Planet. They are skeptical, so please confirm that’s why there is a picture of a dog there….
plukasiak

pix of pi (http://farm3.static.flickr.com/2194/2537704298_27faa8822a_m.jpg )

and koa

(http://farm3.static.flickr.com/2041/2537704308_9e2e565be6_o.jpg )

(they insisted I post this…)
Barbara Kiviat

@mbirch: Finance charges are counted as an expenditure. Excluding interest payments related to houses and cars (which are counted separately), the average family spent $167.63 on finance charges in 2007. Taxes aren’t counted as an expenditure. The data can be found elsewhere in the survey, though. The average family spent $2,233.48 in personal taxes.(Remember that this is a mathematical average; we’ve almost surely got folks in there paying no taxes, dragging the number down.)
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@pluk: Funny you should bring up the dog picture. We went back and forth on whether to include it, wondering if it would be distracting. Pets, indeed, are “entertainment,” according to the Bureau of Labor Statistics. They’re right there on the list between audio/visual equipment and tricycles. Pi and Koa are beautiful dogs. I’m sure it pains you to tell the lie about Animal Planet, but you are doing it to protect them. It is for the best.
curmudgeon57

I have cats, and they are also beautiful animals that fall under the category of health care.
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I just read your article, Barbara, and cannot help but wonder how I became so, well, un-American over the past two decades. During that time, I have saved 30 percent of my gross income, drive an 11-year old car (with no plans to give it up), and don’t sweat the small things (but mostly pass on the big ones). The key, I believe, is to establish a standard of living for yourself that fits you, and is below your income. Rest assured, I don’t feel poor; I simply feel where I belong.
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Of course, thanks to present market circumstances, I may not be able to retire comfortably when the time comes.
curmudgeon57

I also read your article on “The real problem with credit cards: you” (the title shown on CNN.com). I was a bit offended by that title, until I realized that in news publishing the writer rarely has final say on the title. You may want to disavow this title, especially as you note in the article that 42 percent of people pay off their credit cards in full. Still, the results of the psychological research were quite interesting.
Barbara Kiviat

I feel like we’re all sharing today. I have a Betta fish. His name is Beta. He has an underbite.
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Curmudgeon, you are indeed correct. I have nothing to do with how we title stories online, and only marginal control over how we title them in the magazine. Glad you liked the piece.
mbirchmeier

My fiancee and I have two cats: A female names Sammie, and a tom named Ivan. Sammie likes laying on the couch and Ivan enjoys pushing glasses full of liquid off of counters.
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Overall I was just curious what the average ‘savings’ rate was since it wasn’t shown, and the numbers seem to misalign with ‘average’ or ‘median’ income numbers for 2007.
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-MBirchmeier
Barbara Kiviat

@MBirch: Oh, the graphic only shows a sampling of what we spend money on. I didn’t have room for each and every category.
http://www.joetaxpayer.com joetaxpayer

MBirchmeier – The number you found was ‘median’ median means half higher half lower. Average, in this case, will be above median, as one person making $1m/yr “averages up” 100 people by $10,000. The graphic and story content are still valid, but for a family grossing closer to $70-75K.